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In the last one month, the 10-year g-sec has witnessed a decline of 10-12 bps due to comfortable CPI numbers. However, inflation is going up again and market could see some near-term volatility.
To know more about debt market outlook in the coming month, we spoke to experts like Anand Nevatia, Fund Manager, Trust MF, Deepak Agrawal of Kotak MF and Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund. Let us see what they have to say.
Anand Nevatia, Fund Manager, Trust MF
Overall view
- CPI for October met market expectations at 4.87%, Core CPI at 4.3%, which reassured policymakers
- One major positive for Indian debt market is Indian government bonds was finally included in JP Morgan Emerging Market Global
- Open market operation (OMO) announcements and temporary price spikes in food/commodities may cause volatility in yields
- 10-year g-sec expected to trade between 7.10% and 7.35% in the medium term
- Elevated rates across yield curves can be anticipated for a few quarters
- Optimism about improvement but cautious stance from central bankers persists
Funds Recommended
- Short term bond funds and corporate bond funds offer low rate sensitivity and can provide attractive accrual income
Deepak Agrawal, CIO, Debt Fund, Kotak MF.png)
Overall view
- The US 10-year bond at the end of October has come down by 63 bps and 2-year bond has come down by 40 bps
- The Indian 10-year g-sec in India at the end of October was close to 7.35% and currently it is trading at 7.25% indicating that it came down by 10-12 bps in a month
- Inflation at 4.90% for the month of October is well within RBI’s target
- Liquidity will continue to remain tight but short-term rates should stabilize at the current level
Funds Recommended
- Investors should invest in banking and PSU, medium-term fund and dynamic bond funds
Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund
Overall view
- Global and domestic 10-year yields have risen
- Despite this, the 10-year yield decreased by 10-12 bps due to high global yields, declining oil prices and inflation concerns
- Money market rates increased by 5-10 bps in November
- Expected 10-year yield range: 7.15% to 7.35%.
Funds Recommended
- Investors can look at money market funds
